Sale of student loans knocks £160m off government debt

Student loans sold off to a private consortium. Photograph: Johnny Green/PA

The government has sold a student loans guide with a encounter worth of £890m for just £160m.

A consortium known as Erudio Pupil Loans led by investment fund manager CarVal bought the book of home loan design loans which have been taken out by close to 250,000 students amongst 1990 and 1998.

The price paid reflects the consortium’s assessment of the proportion of loans likely to be paid back in full or in portion, with the bulk of the book in arrears or deferred. Of the loans sold, just 14% of borrowers are at present repaying their debts. About 46% are earning under £28,775, the level at which the repayment threshold kicks in.

A more 40% are not repaying their debts in line with the terms of their loans.

The Department for Organization, Innovation and Capabilities uncovered strategies to promote the last remaining tranche of home loan type loans in March, arguing the personal sector was very best placed to acquire the outstanding debt.

Announcing the sale on Monday, universities and science minister David Willetts said the deal represented “good value for money, helping to decrease public sector net debt by £160m”. Total public sector net debt was £1.2tn or 75.four% of gross domestic item at the end of October in accordance to figures published final week by the Workplace for National Statistics.

Willetts added:”The private sector is effectively placed to maximise returns from the guide which has a deteriorating worth. The sale will allow the Pupil Loans Organization to target on supplying loans to current college students and collecting repayments on newer loans.”

The minister assured borrowers that there would be no alter to their terms and situations, including to the interest rates charged.

The sale to Erudio Pupil Loans follows two earlier sales of mortgage type loans by the former Labour government in 1998 and 1999, which transferred £2bn of student debt to the personal sector.

Sale of student loans knocks £160m off government debt